Is plan to tax global profits a campaign move?

By insisting that foreign profits also be taxed, Obama could make passing reforms in a divided Congress even more unlikely, according to the RATE Coalition, whose members include AT&T, Boeing, Ford, Home Depot, Nike, Time Warner Cable and Walt Disney.

“The more complications you throw in there, the less likely this will get done,” said Jim Pinkerton, co-chairman of the coalition and former White House domestic policy adviser to Presidents Ronald Reagan and George H.W. Bush. “You want to focus on something that will get enacted.”

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Many corporations also fear a tax on foreign profits would hurt their business worldwide. The policy could put into conflict the administration’s two steps to revive manufacturing, which they’ve branded as “build it here and sell it everywhere.” A new tax geared to promote domestic manufacturing could undermine global sales.

“From our perspective, not a good idea at all,” said Dorothy Coleman, vice president of tax and domestic economic policy for the National Association of Manufacturers. “In effect, it would discriminate against U.S. companies to the advantage of foreign companies.”

Companies consider several factors when opening a factory overseas — not just taxes, Coleman said. Most firms open plants near their customers and supply chains, making it easier for them to tap foreign markets.

Taxing foreign earnings might handicap U.S. corporations trying to expand overseas, she continued. An American-owned factory in Düsseldorf, Germany, would send a share of its profits to the federal government, while its German competitor would gain a competitive edge by having a lower tax burden.

The flip side is that the sort of territorial tax system favored by Republicans could cause companies to move jobs offshore.

In October, House Ways and Means Committee Chairman Dave Camp (R-Mich.) outlined reforms that would exclude 95 percent of foreign profits from taxes. The change would make it easier for money to flow back to the United States for investment, but the traffic could just as easily go the other way.

The policy could encourage companies to lower their tax bills by shifting their earnings — and presumably more of their workers — to other countries, said Rebecca Wilkins, senior counsel at Citizens for Tax Justice.

“That’s like pouring gasoline on a fire,” she said. “It’s a huge incentive to be even more aggressive in offshoring profits.”

Striking the right balance between jobs at home and growth abroad will become critical in any reform. Even if they can’t agree on a fix, both Democrats and Republicans acknowledge that current tax laws have worsened the economy.

In a September speech before the Economic Club of Washington, D.C., House Speaker John Boehner (R-Ohio) called the Tax Code one of “government’s threats to job creation,” saying it “discourages investment and rewards special interests.”

Obama sounded a similar note last Wednesday in Iowa, one of five swing states he visited right after his State of the Union address.

“Right now, companies get all kinds of tax breaks when they move jobs and profits overseas,” the president said in a speech at Conveyor Engineering and Manufacturing in Cedar Rapids, Iowa. “A company that chooses to stay in America gets hit with one of the highest tax rates in the world. That’s wrong. It doesn’t make sense.”

Readers' Comments (14)

Idiot. What's to stop them from moving their HQ out of this country? Which is easier, relocating plants in foreign countries back to the states where energy costs are through the roof, labor costs are extremely high, you have the EPA breathing down your neck, and you have a government that can't wait to get it's hands down your wallet to extract all sorts of money that will not help your company in any way shape or form. Or just moving, on paper, the company HQ to a country that'll be glad to have you?

Dr_Al, is it possible that you can be that dumb.? If they move their HQ then they are no longer an American company so their access to our markets becomes a different ball game. I think this administration has finally figured out what they need to be focussing on. If they make this a focal point of President's job creation agenda, the sun will not shine on the GOP for a very long time. You've got you platform Mr. President, now steamroll over those "job creators".

I am an American citizen who has resided 41+ years in Europe and have been taxed on my global income since 1976!!!!!!! Each year I must submit a US tax return! So, what's the problem with asking American corporations and banks to do the same as what is required from American citizens?

I lost a famous IRS court case in 1998. Despite the fact that I paid 56% income tax in Germany, plus 7% social taxes, the IRS got me on the Alternate Minimum Tax, which was conviently placed outside double taxation treaties. Ergo, I had to pay additional taxes to the U.S. because I was living outside the U.S. Had I earned my salary in the U.S., my tax rate would have been ca. 33%. Not fair, but why should American corporations not be treated the same way as American citizens?

My proposal would be that American corporations should have their annual profits taxed at a higher rate if they chose to leave them abroad and a lower rate should they repatriate them. This is similar to the German corporate tax rates, which are higher if a company choses not to pay a dividend and decreased on payment of a dividend.

The basic ideology of Obama is evident in this proposal. Obama's thought process is always to view business and industry through the eyes of a community organizer. His objective never is to support business only to benefit from them. Instead of encouraging the return of trillions of dollars parked outside the country, he looks for ways to extend the tentacles of government outside the country.all

There is an estimated one trillion dollars that could be brought back into the country to create jobs and build industry. Instead of trying to bring this money back Obama focuses on devising ways to tax this money with no thought as to bringing it back and putting it to work. This is a short-circuit in thinking that is all too familiar.

Once again Obama's profound lack of experience and understanding of how business and our economy works is on glaring display. He will say anything to get elected no matter how foolish. This is very frustrating.

That money is extracted from the economies overseas. Only the people overseas have the right to tax it.

Owebummer and his Marxist Democrats sees those in foreign countries as their slaves and think they have the DIVINE RIGHT to demand tribute from those slaves to fund their profligate spending.

It is the height of XENOPHOBIA.

This is exactly how the Kings and Queens of Spain, France, and Portugal treated the Americas 500 years ago.

*ONLY* when that money is brought into the US and used in the US does it become US money. That is when we have the right to tax it.

That money Owebummer and the Marxist Democrat XENOPHOBES want to extract from foreign economies is just as valuable to the foreign economies to fund investment as it is to our government to fund political power.

All the rest of the world is moving to territorial taxing. Only Owebummer and his Marxist Democrats are proposing going the other way.

Can you imagine the furor if the State Dept printed this letter in tomorrow's major newspapers.

To; Barak Obama, President of the United States

Dear Sir,

Because the companies listed below do business in our countries, we are demanding that they submit 10% of their net revenues to each of us. This is our Divine Right as sovereign nations on this planet.

In true Marxist fashion, Obama proposes to tax Foreign Profits that will further alienate America as "Leviathan Central" to all and any Capital Investment being deployed by American interests into the Global Economy.